8011-01p
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100462; File No. SR-LCH SA-2024-003]
Self-Regulatory Organizations; LCH SA; Order Approving Proposed Rule Change
Relating to the Terms of Reference of the Board and Sub Committees
July 5, 2024.
I.

Introduction
On May 6, 2024, Banque Centrale de Compensation, which conducts business

under the name LCH SA (“LCH SA”) filed with the Securities and Exchange
Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange
Act of 1934 (“Act”),1 and Rule 19b-4 thereunder,2 a proposed rule change (the “Proposed
Rule Change”) to amend the Terms of Reference (“ToR”) of its Board of Directors
(“Board”) and the ToR of the following Board subcommittees: Technology, Security and
Resilience; Audit; Risk; and Nomination. The Proposed Rule Change was published for
comment in the Federal Register on May 23, 2024.3 The Commission has not received
any comments on the Proposed Rule Change. For the reasons discussed below, the
Commission is approving the Proposed Rule Change.
II.

Description of the Proposed Rule Change
LCH SA is a clearing agency registered with the Commission. Through its

CDSClear business unit, LCH SA provides central counterparty services for securitybased swaps, including credit default swaps, and options on credit default swaps. LCH

15 U.S.C. 78s(b)(1).

17 CFR 240.19b-4.

Securities Exchange Act Release No. 100169 (May 17, 2024), 89 FR 45717 (May 23, 2024) (File
No. SR-LCH SA-2024-003) (“Notice”).

SA is an affiliate of LCH Ltd, through common ownership by LCH Group.4 LCH SA’s
ultimate parent company is London Stock Exchange Group (“LSEG”).5
LCH SA’s Board is responsible for LCH SA’s overall management. It determines
LCH SA’s business strategies and oversees their implementation.6 LCH SA’s Board has
subcommittees that provide opinions, proposals, and recommendations to the full Board.7
The ToR of these Committees and of the Board detail their organization and functioning.8
LCH SA proposes updating these ToR. The proposed updates fall into six
categories. The first category would rename the Technology, Security and Resilience
Committee as the Operational Resilience Committee and expand the ambit of that
committee. The second category would update the Audit Committee’s responsibilities.
The third would make additional changes to the Risk Committee’s responsibilities, its
supervision of risk at LCH SA, and other matters. The fourth would delete redundant
language from the ToR. The fifth would make updates to reflect changes to the existence
of and responsibilities for certain positions at LCH Group, which is LCH SA’s
intermediate parent company. The final category would include other miscellaneous
changes.
A.

Operational Resilience Committee

The Proposed Rule Change would rename the Technology, Security and
Resilience Committee; expand the Committee’s responsibilities; make the Committee the

LCH SA, Comprehensive Disclosure As required by SEC Rule 17Ad-22(e)(23), Section 3.2,
https://www.lch.com/system/files/media_root/LCH%20SA%20Comprehensive%20Disclosure%2
0Covered%20Clearing%20Agency%20standards%20-%20SEC%20%202020_Final%20version.pdf#:~:text=LCH%20SA%20provides%2C%20on%20its%20website
%2C%20a%20comprehensive,elements%20required%20by%20regulation%20EU%20N%C2%B0
%20575%2F2013%20%28CRR%29.

Id.

LCH SA Terms of Reference of the Board, Article 12.

LCH SA Terms of Reference of the Board, Article 15.

LCH SA Terms of Reference of the Board, Article 1; LCH SA Terms of Reference of the Board,
Article 16; LCH SA Terms of Reference of the Board, Article 17; LCH SA Terms of Reference of
the Board, Article 18; LCH SA Terms of Reference of the Board, Article 20.

representative of, and advisor to, the Board on matters related to operational resilience;
specify the Committee’s relationship with other Board committees; and revise the
qualifications required for members of the Committee.
Renaming the Committee
First, as noted above, the Proposed Rule Change would rename the Technology,
Security and Resilience Committee to be the Operational Resilience Committee. To that
end, the Proposed Rule Change would amend this Committee’s ToR, Articles 15 and 20
of the Board ToR, and Article 3.3.8 of the Audit Committee ToR to reflect this name
change. Additionally, to reflect the Operational Resilience Committee’s new name and
to align with the Operational Resilience Committee ToR, LCH SA proposes changing the
title of Article 11 of the Risk Committee ToR from “Operational Risk Management” to
“Operational Resilience Risk.”9
Committee’s Responsibilities
LCH SA proposes the name change to better reflect the ambit of the Committee,
which, under the Proposed Rule Change, would include technical subjects related to
information systems, technology, and cybersecurity, as well as operational resilience.10
To reflect these responsibilities, LCH SA proposes replacing references to “technology,
security and operational resilience” with references to “operational resilience” in Articles
1.4.3, 1.6, and 1.7 of the ToR.11 For the same reason, LCH SA proposes changes to
Articles 4.2.1 and 4.2.6.12 In Article 4.2.1 of the Operational Resilience Committee ToR,
LCH SA proposes specifying that the Operational Resilience Committee’s review of
LCH SA’s operations and technology strategy and policies relates to operational
resilience. In Article 4.2.6 of the Operational Resilience Committee ToR, the Proposed
Notice, 89 FR at 45720-21.

Id. at 45717.

Id. at 45718 n.5.

Id.

Rule Change would note, in part, that the Operational Resilience Committee must review
and consider, where appropriate, LCH SA’s resilience risk policies rather than its policies
regarding operations and technology risk.
The Proposed Rule Change also would make the responsibilities of the
Committee consistent with current practice and other LCH SA ToR. For example,
current Article 1.2 states that the Committee must determine if management has put in
place adequate strategies and plans which, among other things, provide reasonable
assurance that LCH SA operates within its risk appetite. LCH SA’s proposal would
specify that the risk appetite is set by the Board, in accordance with current practice.13
Separately, the Proposed Rule Change would also add text consistent with current
practice to Article 1.2 of the Operational Resilience Committee ToR, stating that the
Operational Resilience Committee will receive a regular assessment of operational
resilience risks.14 Article 1.5 of the Operational Resilience Committee ToR currently
provides, in part, that the Operational Resilience Committee must keep itself informed of
changes in guidance from within the broader Group. LCH SA proposes changes to this
provision requiring the Operational Resilience Committee to keep itself informed of
changes in guidance from within the broader LCH Group and LSEG to align it with
current practice.15
Board Representative and Advisor
Consistent with these responsibilities, the Proposed Rule Change also would
make the Operational Resilience Committee the Board’s representative and advisor on
matters related to operational resilience.16 Currently, Section 1.1 of the Committee ToR
provides that this Committee shall represent the interests of the Board in sound
Id. at 45718.

Id.

Id.

Id. at 45717-18.

management of technology security and operational resilience, including cyber security,
to ensure that technology security and operational resilience strategies, investments and
outcomes support the mission values and strategic goals of LCH SA. The Proposed Rule
Change would revise this to state that the Operational Resilience Committee shall
represent the interests of the Board in the sound management of operational resilience to
ensure that technology security, cyber security and operational resilience strategies,
investments and outcomes support the mission, values, and strategic goals of LCH SA.
LCH SA’s proposal would also alter Section 1.2 of the Committee ToR to require the
Operational Resilience Committee to determine whether management has put in place
adequate strategies and plans which include appropriate management of operational
resilience, rather than strategies and plans which include appropriate management of
technical, security, operational resilience and cyber risks. The Proposed Rule Change
would separately add a new Article 1.4.4 to indicate that the Operational Resilience
Committee must help the Board review LCH SA’s ongoing outsourcing and third-party
risk management arrangements, since they also relate to operational resilience.17
Other Board Committees
Just as the Committee would provide advice to the full Board on operational
resilience matters, the Committee also would provide advice on operational resilience
matters to other Board committees.18 Reflecting current practices to that end, the
Proposed Rule Change would add new Articles 4.2.13, 4.2.14, and 4.2.15.19 Article
4.2.13 would require the Committee to provide advice to LCH SA’s Risk Committee on
specific operational resilience risk related matters as appropriate. Article 4.2.14 would
require the Committee to review Detailed Operational Risk Assessments (DORAs) with

Id. at 45718.

Id.

Id.

significant elements relating to technology, cyber or other operational resilience, prior to
recommending approval by the Risk Committee.20 Article 4.2.15 would require that the
Committee be notified of Operational Risk Assessments (ORA) related to cloud
initiatives.
Related to the proposed addition of Article 4.2.14 of the Operational Resilience
Committee ToR, LCH SA proposes changing Article 11.3 of the Risk Committee ToR to
note that the Risk Committee will review and approve the recommendations of the
Operational Resilience Committee in relation to DORAs for significant projects and new
products and notify the Board of the same. Currently, Article 11.3 requires the Risk
Committee to review DORAs for all significant projects and new products and to make
recommendations to the Board for their approval. LCH SA also proposes adding a new
Article 11.2 to the Risk Committee ToR to require the Risk Committee to inform the
Board in a timely manner of any new risk affecting the resilience of LCH SA. These
proposed changes are meant to align the Risk Committee ToR with the Operational
Resilience Committee ToR.21
To further reflect the Committee’s role as advisor to the Risk Committee on
resilience risk matters, LCH SA also proposes to add a new Article 1.3 to the Operational
Resilience Committee ToR.22 The proposed Article 1.3 requires that the Operational
Resilience Committee contribute to the review of the Technology Risk, Business
Continuity Risk, Information Security and Cyber Risk, Operational Risk, Third Party
(Outsourcing) Risk, and Physical Security Risk policies before they are presented to the
Risk Committee for review and recommendation to the Board for approval. The
DORAs are risk assessments related to new product initiatives, strategic projects, or significant
changes. The relevant LCH SA business line or function in charge of the initiative, project, or
change, must produce a DORA whenever the initiative, project, or change presents operational
risks that are novel or could have the potential to impact the current operational risk appetite
assessment or platform resiliency. See Notice, 89 FR at 45718, n.7.

Id. at 45720-21.

Id. at 45718.

Proposed Rule Change would also note in Article 1.3 that the Operational Resilience
Committee will be notified by the owner of the policies of any breaches or waivers to
those policies. To align the Risk Committee ToR with the Operational Resilience
Committee ToR, LCH SA also proposes changes to Article 11.1 of the Risk Committee
ToR.23 Currently, Article 11.1 requires the Risk Committee to review, on an annual
basis, LCH SA’s Resilience Risk Policy, to consider proposals for modification of those
arrangements, and to make recommendations to the Board for approval. Under the
Proposed Rule Change, Article 11.1 would require the Risk Committee to review, on an
annual basis, the Company’s Operational Resilience Risk Policies, following review by
the Operational Resilience Committee, and to make recommendations to the Board for
approval.
Relatedly, LCH SA proposes deleting from the ToR language related to other
Committees to align with the Operational Resilience Committee’s responsibilities. For
example, current Article 11.2 of the Risk Committee ToR requires the Risk Committee to
review and provide advice on any aspects of LCH SA’s Operational Risk Management
Framework on request by the Audit Committee or the Board. Because it requires the
Risk Committee to take action within the ambit of the Operational Resilience
Committee,24 LCH SA proposes removing this Article 11.2 of the Risk Committee ToR.
Similarly, Article 1.3.6 of the Audit Committee ToR provides that the Audit Committee
must assist the Board in fulfilling its responsibility relating to review of LCH SA’s
internal control environment, including review of resilience risk matters. The Proposed
Rule Change would delete the reference to review of resilience risk matters because those
would be the Operational Resilience Committee’s responsibility.25 Separately, LCH SA

Id. at 45720-21.

Id. at 45721 n.19.

Id. at 45719.

proposes removing current Article 3.3.6(a)(iv) of the Audit Committee ToR in its entirety
because it requires the Audit Committee to review provisions for business continuity and
disaster recovery and the assessment of the effectiveness of the arrangements in place at
least once a year. This is also the Operational Resilience Committee’s responsibility.26
Finally, LCH SA also proposes changes to Article 4.4 of the Operational
Resilience Committee ToR to clarify the Committee Chair’s membership on the Risk and
Audit Committees.27 Current Article 4.4 declares the Chair of the Operational Resilience
Committee to be a member of the Audit Committee. Moreover, it allows the Risk
Committee to invite the Chair of the Operational Resilience Committee to Risk
Committee meetings on relevant matters and in a non-voting capacity. Under Article 4.4
as revised, the Chair of the Operational Resilience Committee would be a standing
member of the Audit Committee and the Risk Committee. To further carry out this
change, LCH SA also proposes adding a new Article 1.1.2 to the Risk Committee ToR,
which would require that the Chair of the Operational Resilience Committee be a
member of the Risk Committee.28
Qualifications of Committee Members
LCH SA proposes additional changes to ensure members of Operational
Resilience Committee have experience consistent with the Committee’s responsibilities.29
Currently, Article 2.1.2 provides that members of the Committee ideally have significant,
recent and relevant experience of the operations of LCH and its dependence on
technology. The Proposed Rule Change would revise Article 2.1.2 to require members of
the Operational Resilience Committee to have the relevant expertise required for the
Committee to function properly, as well as recent and relevant experience of the
Id. See also Article 4.2.8 of the Operational Resilience Committee ToR.

Id. at 45718

Id. at 45718 n.9.

Id. at 45718.

operations of LCH Group. LCH SA also proposes to renumber current Article 2.2 of the
Operational Resilience Committee ToR to Article 2.1.3, and amend it to provide that
other experts in IT, security, resilience matters, and more generally on operational
resilience matters, rather than merely other technology expert individuals, may attend the
meetings of the Committee on relevant matters in a non-voting capacity.
B.

Audit Committee

The Proposed Rule Change would make various updates to the Audit
Committee’s responsibilities. For example, current Article 1.3.5 provides that the Audit
Committee will review Enterprise Risk Reports. Because LCH SA is expanding the
detail provided in these reports, the Proposed Rule Change would rename them as the
Resilience and Enterprise Risk Management reports.30
The Proposed Rule Change also would amend Article 3.3.4, which sets out the
Audit Committee’s responsibilities for reviewing LCH SA’s compliance with regulations.
The Proposed Rule Change would add to Article 3.3.4 a requirement that the Committee
approve the compliance policies and be informed of any breaches. LCH SA is making
this change to document an existing practice of the Audit Committee.31
Similarly, current Article 3.3.5 requires that the Audit Committee, among other
things, review the process for annual model validations and breaches of LCH SA’s Risk
Governance Framework. The proposed rule change would add a requirement that the
Committee be notified of outside appetite financial and resilience risks. LCH SA
proposes this change to make the Audit Committee better informed as it carries out its
responsibilities.32

Id. at 45719.

Id.

Id. at 45719.

Finally, current Article 3.3.6(a)(iii) requires that the Committee receive annual
reports required by a 2014 order of its national regulators related to internal controls.33
To ensure that the Audit Committee receives reports required by all applicable laws and
regulations, rather than the reports required by those specific articles, LCH SA proposes
deleting the reference to the specific order. Instead, Article 3.3.6(a)(iii) would require
that the Audit Committee receive annual reports required by law or regulation from time
to time.34
C.

Risk Committee

The proposed rule change also would change the Risk Committee ToR with
respect to the Committee’s responsibilities, the Committee’s supervision of risk at LCH
SA, reporting by the Committee, responsibilities of LCH SA’s Chief Risk Officer, and
membership of the Committee.
Responsibilities
With respect to the responsibilities of the Committee, the Proposed Rule Change
first would add a new Article 6.4. Article 6.4 would provide that the Risk Committee
should be notified of the outcome of the annual independent validation of the
counterparty credit scoring model, in accordance with the Model Governance Validation
and Review Policy. LCH SA is making this change to be consistent with its current
practice.35
Current Article 7.4 requires that the Committee review LCH SA’s risk policy on
the eligibility of new products. Since this policy is now called the Contract and Market
Acceptability Policy, LCH SA proposes reflecting this name change in Article 7.4 of the
Risk Committee ToR.36
Id.

Id.

Id. at 45720.

Id. at 45720 n.15.

LCH SA also proposes a new Article 7.5 in the Risk Committee ToR. This new
article would require that the Committee review annually a report outlining the
compliance of all markets and products against the criteria defined in the Contract and
Market Acceptability Policy. LCH SA is making this change to be consistent with its
current practice.37
Further, for the same reason, LCH SA proposes revising renumbered Article
7.7.1. Current Article 7.7.1 clarifies that the CEO of LCH SA may be given authority to
approve clearing of certain new contracts or products, without prior approval by the Risk
Committee, subject to notifying the Committee. The Proposed Rule Change would add
to this provision approval of trade venues, in addition to contracts or products.38
Articles 8 and 9 of the Risk Committee ToR contain additional proposed changes
to the Committee’s responsibilities, which LCH SA is making to reflect current practice.39
Current Article 8.2 requires that the Committee review initial margin policies and
consider amendments to those policies. The Proposed Rule Change would amend Article
8.2 to reflect that the initial margin policies that the Risk Committee currently reviews
are contained within the Financial Resource Adequacy Policy. LCH SA would also add a
new Article 8.4. This new article would require the Risk Committee to be notified of the
outcome of the annual independent validation of all margin models in accordance with
the Model Governance, Validation and Review Policy.
Proposed revisions to Article 9 would clarify the Committee’s responsibilities
related to LCH SA’s default procedures, again to be consistent with current practice.40
Current Article 9.1 requires that the Committee, in certain circumstances, review the
adequacy of LCH SA’s default funds on the basis of stress testing. The Proposed Rule
Id.

Id.

Id.

Id.

Change would revise this slightly, to clarify that the Committee’s review would be on the
basis of stress testing and reverse stress testing reports.
LCH SA also proposes to add new Articles 9.4 and 9.7 to reflect current
practice.41 Article 9.4 would provide that the Risk Committee should be notified of the
outcome of the annual independent validation of all stress testing models used to size the
default funds in accordance with the Financial Resource Adequacy Policy, while Article
9.7 would note that the Risk Committee reviews default management fire drill exercise
reports to assess the Company’s default management process.
Moreover, LCH SA proposes several new provisions and revisions in Article 10
of the Risk Committee ToR to reflect current practices related to liquidity risk
management.42 First, the Proposed Rule Change would add new Articles 10.3, 10.4, and
10.6. Article 10.3 would provide that the Risk Committee reviews annually (or more
frequently if deemed necessary) the LCH SA Liquidity Plan detailing how the standards
contained in the Liquidity Risk Policy are applied, to consider proposed changes, and to
make recommendations to the Board for approval. New Article 10.4 would require that
the Committee be notified of the outcome of the annual independent validation of the
liquidity risk model, in accordance with the Liquidity Risk Policy. New Article 10.6
would require that the Committee be notified of the outcome of the annual independent
validation of the collateral haircut model, in accordance with the Collateral Risk Policy.
Further, the Proposed Rule Change would add a sentence to renumbered Article 10.5
noting that the Risk Committee should consider the addition of new collateral types and
associated risk controls, and recommend them to the Board for approval.
The Proposed Rule Change would also add a new Article 12 to the Risk
Committee ToR, titled Model Governance and Procyclicality. Under new Article 12.1,

Id.

Id.

the Risk Committee would review annually (or more frequently if deemed necessary) the
Company’s Model Governance, Validation and Review Policy, to consider proposals for
modification of those arrangements, and to make recommendations to the Board for
approval. Under proposed Article 12.2, the Risk Committee would review, at least
annually and upon material change, reports prepared by independent model experts
confirming the ongoing suitability of LCH SA’s financial risk models, in accordance with
the Model Governance, Validation and Review Policy. Proposed Article 12.3 would
require the Committee to review annually (or more frequently if deemed necessary) LCH
SA’s Procyclicality Risk Policy, to consider proposals for modification of those
arrangements and to make recommendations to the Board for approval. The Committee
also would review, at least annually, reports confirming that LCH SA’s risk models do
not operate in a procyclical manner under proposed Article 12.4. Consistent with LCH
SA’s overall current practice, these changes would help ensure that the LCH SA Risk
Committee ToR mirror the corresponding ToR of its affiliated company, LCH Limited.43
Proposed changes to renumbered Articles 13 and 20 of the Risk Committee ToR
also would reflect LCH SA’s current practices. 44 LCH SA proposes a new Article 13.2
reflecting the current practice that the Risk Committee reviews, on an annual basis (or
more frequently if deemed necessary), LCH SA’s Recovery Plan and Wind Down Plan,
considers proposals for modification of those arrangements, and makes recommendations
to the Board for approval. Current Article 12.2 requires that the Committee consider any
issue relating to the outsourcing of functions which may impact the risk management of
LCH SA. The Proposed Rule Change would renumber this article to 13.3 and would add
language to clarify that it applies to any issue or new arrangement relating to the

Id. at 45721.

Id.

outsourcing of functions which may impact the risk management of the LCH SA, rather
than only issues.
LCH SA’s proposal would also correct renumbered Article 20.2 to reflect how the
Risk Committee currently may assess the remuneration structure’s impact on LCH SA’s
risk profile.45 The current article, in part, requires that the Risk Committee have access
to: (i) the risk management department (to assess how the remuneration structure affects
the risk profile of LCH SA); (ii) the human resource department, (iii) the compliance
department, and (iv) the internal audit department. The Proposed Rule Change would
revise renumbered Article 20.2 to delete text giving the Risk Committee access to the risk
management department. Instead, under revised Article 20.2, the Committee would have
access to (i) the human resource department (to assess how the remuneration structure
affects the risk profile of LCH SA), (ii) the compliance department, and (iii) the internal
audit department. LCH SA is making this correction to reflect how the Risk Committee
currently considers this remuneration risk.46
Supervision of Risk
The Proposed Rule Change would make several changes to the Risk Committee
ToR related to the Committee’s supervision of risk, including through the information
reported to the Committee. One such proposed change would add a new Article 3.2
clarifying that the risks within the current scope of the LCH SA Risk Committee are
financial and model risks and operational resilience risks. LCH SA proposes this change
to strengthen the Risk Committee’s supervision of certain information technology and
resilience risk matters.47 As noted above, while the Operational Resilience Committee
would also have responsibilities related to operational resilience risks, that committee’s

Id.

Id.

Id. at 45720.

role is one of review, and it would be required to provide advice to LCH SA’s Risk
Committee on specific operational resilience risk-related matters as appropriate.
LCH SA also proposes a change in Article 4.2 of the Risk Committee ToR.
Current Article 4.2 provides that the Risk Committee will receive a detailed report from
the Executive Risk Committee which includes, among other things, the risk profile of
LCH SA on a monthly basis. The Proposed Rule Change would clarify that this report
would cover the risks defined within the scope in Article 3.2 of the Risk Committee
ToR.48 Moreover, current Article 4.2 provides that this report will cover LCH SA and
LCH Group. Due to a change in corporate structure, LCH SA’s proposal would indicate
in Article 4.2 that this report would include the risk profile of only LCH SA, rather than
LCH SA and LCH Group.49
Reporting by the Risk Committee
In addition to revising the reporting to the Risk Committee, the Proposed Rule
Change would revise the reporting by the Risk Committee. Specifically, LCH SA
proposes that the Risk Committee Secretary no longer make available all minutes to the
Chair of the Audit Committee of the LCH Group Board under Article 2.9 of the Risk
Committee ToR. Instead, Article 2.9 would only require the Risk Committee Secretary
to make those minutes available to the LCH SA Board and the Chair of the LCH SA
Audit Committee. LCH SA proposes this change because the LCH Group Board does
not usually consider discussions, decisions, and recommendations of the Risk Committee.
Instead, discussions, decisions, and recommendations of the Risk Committee are reported
to the LCH SA Board.50
Chief Risk Officer

Id.

Id. at 45720 n.13.

Id. at 45720.

The Proposed Rule Change would also amend the Risk Committee ToR as it
relates to certain responsibilities of LCH SA’s Chief Risk Officer (“CRO”). First, the
Proposed Rule Change would delete Article 2.10 of the Risk Committee ToR in its
entirety. This provision requires that the CRO report to the LCH Group Board on the
discussions, decisions, and recommendations of the Risk Committee to formally ratify
those decisions and recommendations that affect the Group. LCH SA is deleting this
provision because, as noted, the LCH Group Board does not usually consider discussions,
decisions, and recommendations of the Risk Committee.51
Article 10.7.4 currently requires either the CRO or the Head of Collateral and
Liquidity Management (“CaLM”) to sign off on breaches of the limits or restrictions
detailed in the Collateral Risk Policy and/or the Investment Risk Policy. Since the CRO
is responsible for these policies, including signing off on them as part of their second line
function, LCH SA proposes requiring sign-off by only the CRO.52
The Proposed Rule Change would also clarify the responsibilities of the CRO in
renumbered Article 16 (current Article 15) by editing renumbered Article 16 of the Risk
Committee ToR to simplify the description of the information provided to the Committee
by the CRO. Current Article 15.1 provides that the Committee will consider and review
regular reports prepared by the Risk Management Department of LCH SA, which covers
recent developments in at least the areas listed in current Articles 15.1.1 through 15.1.8,
such as membership and operations. LCH proposes changing this Article’s number to
16.2 and deleting the list of areas to be covered. Instead, a new Article 16.1 would state
that the Risk Committee receives management information from the CRO of LCH SA on
the assessment of all financial, model and operational resilience risks, and informs the
Board in a timely manner of any new significant risk change affecting the resilience of

Id.

Id.

the Company. New Article 16.1 also would state that this report will include any
breaches or waivers granted. Proposed Article 16.2 would indicate that the management
information will cover recent developments and material issues related to Financial,
Model, and Operational Resilience Risks. This revised Article would still require the
CRO report to the Committee on all risks, but would not list the specific areas covered, as
currently found in Article 15.1.
Membership
LCH SA also would amend the Risk Committee ToR as it relates to members of
the Committee. Current Article 1.1 provides that the Risk Committee must include
representatives of clients as required by law or regulation from time to time. Article 1.1
further explains that no client representatives on the Committee may be employees of
LCH Group. The Proposed Rule Change would revise this slightly, to provide that these
client representatives may not be employees of any LCH Group company, meaning LCH
Group Holdings Limited and its subsidiaries. This change is proposed to conform the
Risk Committee ToR to LCH Group requirements.53
Moreover, Article 1.1 also currently provides that the Risk Committee must
include representatives of LCH SA’s Clearing Members as required by law or regulation
from time to time and who have significant experience in market, credit, or liquidity risk
management. The Proposed Rule Change would add operational risk management to this
list of subject matters in respect of which such Committee members should have
significant expertise and experience. This would be consistent with the overall scope of
responsibility of the Committee, as discussed above. This change is proposed to conform
the Risk Committee ToR with LCH Group requirements.54

Id. at 45719.

Id.

LCH SA also proposes changes related to permitted conduct by External
Committee Members of the Risk Committee. Current Article 1.5 defines External
Committee Members as those members of the Risk Committee that are not independent
directors of LCH SA, who attend meetings as risk experts and represent Clearing
Members and clients. Currently, under Article 1.6 of the Risk Committee ToR, External
Committee Members may consult with other individuals within their organization, prior
to Risk Committee meetings, where expertise other than the specialty of the external
member is required. LCH SA’s proposed changes specify that External Committee
Members’ consultations with other individuals within their organization, under Article
1.6, are subject to restrictions set out in the confidentiality agreements signed by the
External Committee Members.
Finally, the Proposed Rule Change would amend the list of individuals that can
attend meetings of the Committee in a non-voting capacity. Currently, Article 1.2 lists
individuals that may do so, including the Head of Financial Risk of LSEG, or their
nominated delegate (under 1.2.6). LCH SA proposes revising current Article 1.2.6 to
replace the Head of Financial Risk of LSEG, or their nominated delegate, with the Chief
Risk Officer of LSEG, or their nominated delegate. LCH SA believes this proposed
change would ensure that the Risk Committee has appropriate oversight of all risks,
including those risks that affect its ultimate parent company, LSEG.55
Similarly, under current Article 1.2.8, such other individuals within the Group, as
considered appropriate by the Committee, may attend in a non-voting capacity. The
Proposed Rule Change would replace the reference to “individuals within the Group”
with LCH SA employees. LCH SA proposes this change because it believes LCH SA
employees would ostensibly have the expertise and background necessary to participate

Id. at 45719.

in Risk Committee meetings.56 Moreover, under the Proposed Rule Change, the
Committee Chair rather than the entire Committee would determine whether it is
appropriate for LCH SA employees to receive an invitation to a Risk Committee meeting,
because such invitations would be limited to a particular agenda item and in a non-voting
capacity.57
D.

Deletion of Redundant Language

LCH SA proposes several changes that would delete redundant language, and
make related updates as needed, in the ToR of the Audit, Operational Resilience, and
Risk committees.
In the Audit Committee ToR, current Article 1.4 requires that the Committee keep
itself informed of changes to laws and regulations applicable to the audit policy of LCH
SA and matters for which the Audit Committee is responsible. The Proposed Rule
Change would remove from Article 1.4 reference to the audit policy of LCH SA because
the “matters for which the Audit Committee is responsible” includes the audit policy.58
Similarly, LCH SA proposes replacing a reference to its audit policy in Article 1.5 with a
reference to “matters listed above.” As revised, Article 1.5 would provide that nothing in
the Audit Committee ToR will diminish the responsibility of the Board to maintain
ongoing review of the matters listed above. A specific reference to audit policy in Article
1.5 is unnecessary because current Article 1.3, which describes the responsibilities of the
Audit Committee, is broad enough to include audit policy.59 The Proposed Rule Change
would also delete current Article 2.3.2 in its entirety. This article indicates that the LCH
SA Audit Committee Chair may also be appointed as the Chair of the LCH Limited Audit
Committee. Article 2.2.2 of the ToR of the Audit Committee for LCH Limited already
Id.

Id.

Id. at 45719.

Id.

notes that the same person can chair both committees.60 Finally, LCH SA would remove
current Article 3.3.4(e), which requires the Audit Committee to review the performance
of LCH SA’s Chief Compliance Officer. LCH SA is removing this provision because it
covers responsibilities held by the Remuneration Committee.61
LCH SA also proposes a change in part to eliminate redundant language in the
Operational Resilience Committee ToR. Current Article 4.2.10 of the Operational
Resilience Committee ToR provides that the Operational Resilience Committee reviews
and receives reports as appropriate, on operations and agreed metrics in conjunction with
the Audit Committee. Since current Article 4.2.9 of the Operational Resilience
Committee ToR already provides that the Operational Resilience Committee receives
reports, as appropriate, from the Audit Committee regarding the results of reviews and
assessments of LCH SA’s operations and technology functions, LCH SA views Article
4.2.10 as redundant.62 Therefore, LCH SA proposes to delete it. With the deletion of
current Article 4.2.10, current Article 4.2.11 would become new Article 4.2.10 with some
proposed revisions. Specifically, new Article 4.2.10 (former Article 4.2.11) would
require the Operational Resilience Committee to review and receive reports in relation to
ongoing technology outsourcing rather than on technology outsourcing.
Moreover, LCH SA’s proposal would remove Article 7.3 of the Operational
Resilience Committee ToR in its entirety. This provision notes that any disagreement
within the Board, including disagreement between the Committee’s members and the rest
of the Board, should be resolved at the Board level. Further, it notes that where
disagreements between the Committee and the Board cannot be resolved, the Committee

Id.

Id.

Id. at 45718. LCH SA also proposes this change because it would help prevent the Operational
Resilience Committee’s responsibilities from overlapping with the Audit Committee’s
Responsibilities. Id.

has the right to report the issue to the shareholders through the Company’s annual report.
LCH SA proposes to remove this provision because it is applicable only to the Audit
Committee ToR.63
Finally, the Proposed Rule Change would make a similar change to the Risk
Committee ToR to remove a redundant provision. Specifically, the Proposed Rule
Change would delete Article 1.2.5 of the Risk Committee ToR in its entirety. This
provision allows the Chief Executive Officer of LCH Group to be invited ex officio to
attend Risk Committee meetings in a non-voting capacity. LCH SA proposes deleting
Article 1.2.5 because the Chief Executive Officer of LCH SA is already listed as the
appropriate ex officio non-voting party under Article 1.2.2 of the Risk Committee ToR.
E.

Positions at LCH Group

The Proposed Rule Change also would make updates regarding changes to certain
positions at LCH Group. As noted above, LCH Group is LCH SA’s intermediate parent
company.
The Proposed Rule Change would update the Nomination Committee, Board, and
Risk Committee ToR to reflect the retirement of the LCH Group Chief Risk Officer
position. Current Article 2.3 of the Nomination Committee ToR provides that the LCH
SA Board will comprise the Chief Executive Officers of LCH Group; LCH SA, as
proposed by the Group CEO; and the Chief Risk Officer of LCH Group, as proposed by
the Group CEO or such other LCH executive as may be proposed by the Group CEO.
Current Article 2.3 defines these individuals as Executive Directors. Since the LCH
Group Chief Risk Officer position has been retired, the Proposed Rule Change would
remove this position from Article 2.3 of the Nomination Committee ToR.64 Instead, the
Chief Risk Officer of London Stock Exchange Group, rather than LCH Group, as

Id.

Id. at 45719 n.12.

proposed by the CEO of LCH Group, will be a member of the Board. The Proposed Rule
Change also would add to Article 2.3 that an LSEG executive, as may be proposed by the
LCH Group CEO, will also be a member of the Board. Finally, under revised Article 2.3,
the term Executive Director would be defined as either the Chief Executive Officer of
LCH SA or LCH Group.
Similarly, LCH SA proposes changes to Article 3 of the ToR of the Board to
account for the retirement of the LCH Group Chief Risk Officer position. Currently,
Article 3 provides that the Board includes, as a category of directors, Executive Directors
which includes the LCH SA CEO, the LCH Group CEO, and an additional LCH
executive, who may be but shall not be limited to the Chief Risk Officer of LCH Group.
LCH SA proposes deleting reference to the LCH Group Chief Risk Officer from this
provision and including only the LCH SA CEO and LCH Group CEO as Executive
Directors. Additionally, LCH SA proposes including as a separate category of Director
an additional LCH or LSEG executive, who may be but shall not be limited to the chief
risk officer of LSEG, as proposed by the CEO of LCH Group. Like the changes to
Article 2.3 of the Nomination Committee ToR, these revisions would replace the Chief
Risk Officer of LCH Group with the Chief Risk Officer of LSEG.
Finally, LCH SA also proposes updating the Risk Committee ToR to reflect the
retirement of the Group CRO. Specifically, the Proposed Rule Change would delete
Article 1.2.4 from the Risk Committee ToR because it indicates that the Chief Risk
Officer of LCH Group may be invited to attend Risk Committee meetings in a non-voting
capacity.65
Separately, current Article 10.7.4 of the Risk Committee ToR provides that if any
of the limits or restrictions detailed in LCH SA’s Collateral Risk Policy and/or

Id. at 45719.

Investment Risk Policy are breached, that breach must be, among other things, reported
to the Risk Committee, the Audit Committee, the Executive Risk Committee, and the
CEOs of LCH SA and LCH Group. The Proposed Rule Change would delete the
reference to the CEO of LCH Group. LCH SA is making this change because LCH
Group’s CEO does not usually consider breaches of those policies. Therefore, it is no
longer necessary to report such breaches to LCH Group’s CEO.66
F.

Miscellaneous Changes

The Proposed Rule Change also would make updates to defined terms across the
various ToR and make other non-substantive changes, as described below.
With respect to the defined terms, the Proposed Rule Change would replace the
term Chairman with Chair in the ToR of the Operational Resilience Committee, Audit
Committee, and Risk Committee.67 LCH SA also proposes changes that would specify
that Group means LCH Group in Article 5.1 of the Operational Resilience Committee
ToR and Article 2.5 of the Risk Committee ToR.68 The Proposed Rule change also
would replace the term Group with LCH in Articles 14.1 and 16.4 of the Risk Committee
ToR in order to be consistent with LCH Group terminology.69
In the ToR of the Board, LCH SA proposes removing the requirement that
meeting minutes be translated to French before being presented to the Board because this
is now unnecessary based on the composition of the Board.70 The Proposed Rule Change
would also edit Article 12(e) of the ToR of the Board to align it with LCH SA’s internal
procedures, which require that the Board approve LCH SA’s Wind Down Plan.71 Under

Id.

Id. at 45717.

Id.

Id.

Id. at 45721.

Id.

current Article 12(e), the Board approves LCH SA’s Business Continuity Policy and
Disaster Recovery Plan. LCH SA proposes that Article 12(e) require the Board to
approve LCH SA’s Business Continuity Policy, Disaster Recovery Plan, and Wind Down
Plan.
Finally, the Proposed Rule Change would renumber various provisions because of
the changes described above as well as make a number of non-substantive clarifying
changes.
III.

Discussion and Commission Findings
Section 19(b)(2)(C) of the Act requires the Commission to approve a proposed

rule change of a self-regulatory organization if it finds that the Proposed Rule Change is
consistent with the requirements of the Act and the rules and regulations thereunder
applicable to the organization.72 Under the Commission’s Rules of Practice, the “burden
to demonstrate that a proposed rule change is consistent with the Exchange Act and the
rules and regulations issued thereunder . . . is on the self-regulatory organization [‘SRO’]
that proposed the rule change.”73
The description of a proposed rule change, its purpose and operation, its effect,
and a legal analysis of its consistency with applicable requirements must all be
sufficiently detailed and specific to support an affirmative Commission finding,74 and any
failure of an SRO to provide this information may result in the Commission not having a
sufficient basis to make an affirmative finding that a proposed rule change is consistent
with the Exchange Act and the applicable rules and regulations.75 Moreover,

15 U.S.C. 78s(b)(2)(C).

Rule 700(b)(3), Commission Rules of Practice, 17 CFR 201.700(b)(3).

Id.

Id.

“unquestioning reliance” on an SRO’s representations in a proposed rule change is not
sufficient to justify Commission approval of a proposed rule change.76
After carefully considering the Proposed Rule Change, the Commission finds that
the Proposed Rule Change is consistent with the requirements of the Exchange Act and
the rules and regulations thereunder applicable to LCH SA. More specifically, for the
reasons given below, the Commission finds that the Proposed Rule Change is consistent
with Sections 17A(b)(3)(C)77 and 17A(b)(3)(F) of the Act78 and Rule 17Ad-22(e)(2)(v).79
A.

Consistency with Section 17A(b)(3)(C) of the Act

Under Section 17A(b)(3)(C) of the Act, LCH SA’s rules must “assure fair
representation of its shareholders (or members) and participants in the selections of its
directors and administration of its affairs.” The Commission has stated that “at a
minimum, fair representation requires that the entity responsible for nominating
individuals for membership on the Board should be obligated by law or rule to make
nominations with a view toward assuring fair representation of the interests of
shareholders and a cross section of the community of participants.”80 Based on its review
of the record and for the reasons discussed below, the Commission believes that LCH
SA’s changes are consistent with Section 17A(b)(3)(C).81
First, the proposed changes would not alter the number of directors that represent
LCH SA’s participants, which are User Directors.82 The Commission approved the

Susquehanna Int’l Group, LLP v. Securities and Exchange Commission, 866 F.3d 442, 447 (D.C.
Cir. 2017) (“Susquehanna”).

15 U.S.C. 78q-1(b)(3)(C).

15 U.S.C. 78q-1(b)(3)(F).

17 CFR 240.17Ad-22(e)(2)(v).

Securities Exchange Act Release No. 20221 (Sept. 23, 1983), 48 FR 45167, 45172 (Oct. 3, 1983).

15 U.S.C. 78q-1(b)(3)(C).

Notice, 89 FR at 45722.

current version of the LCH SA Board ToR.83 Under the ToR, User Directors are
currently a category of Director on LCH SA’s Board. A User Director means a director
who is nominated by a shareholder of LCH Group which is a User or who is otherwise
connected to such User shareholder by virtue of his employment or directorship. The
Proposed Rule Change would not alter the inclusion of User Directors on the Board.
Second, the Proposed Rule Change would work to enhance LCH SA’s owners’
representation in the administration of LCH SA’s affairs. LCH SA has one shareholder,
LCH Group,84 and LCH SA’s ultimate parent company is LSEG. As the Commission
previously found, LCH SA’s ToR ensure LSEG’s and LCH Group’s ability to participate
in LCH SA’s affairs through provisions that would, for example, provide LSEG with a
seat on the LCH SA Board or require LCH SA to seek LCH Group approval to take
action.85 The Proposed Rule Change would enhance LSEG’s representation in the
administration of LCH SA’s affairs by, for example, replacing LCH Group’s Chief Risk
Officer with LSEG’s Chief Risk Officer as a potential member of the Board in the ToR of
the Board and the Nomination Committee. Representation of LSEG is important because
LSEG is LCH SA’s ultimate shareholder. At the same time, despite shifts in LCH
Group’s representation in some respects—for example, the LCH Group CEO would no
longer be invited to Risk Committee Meetings—its representation in the administration
of LCH SA’s affairs would remain significant. For example, under LCH SA’s proposal,
the CEO of LCH Group would still be an Executive Director of LCH SA.

Securities Exchange Act Release No. 89793 (Sept. 9, 2020), 85 FR 57266 (Sept. 15, 2020) (File
No. SR-LCH SA-2020-003).

LCH Group Holdings Limited Report and Consolidated Financial Statements for the year ended
31 December 2023, https://www.lch.com/system/files/media_root/lch-group-holdings-limitedfinancial-statements.pdf.

Securities Exchange Act Release No. 89793, 85 FR at 57271.

For the foregoing reasons the Proposed Rule Change is consistent with the
requirements of Section 17A(b)(3)(C) of the Act.86
B.

Consistency with Section 17A(b)(3)(F) of the Act

Under Section 17A(b)(3)(F) of the Act, LCH SA’s rules, among other things,
must be “designed to promote the prompt and accurate clearance and settlement of
securities transactions . . . derivative agreements, contracts, and transactions . . . and to
assure the safeguarding of securities and funds which are in the custody or control of the
clearing agency or for which it is responsible.”87 Based on its review of the record, and
for the reasons discussed below, the Commission believes that LCH SA’s changes are
consistent with Section 17A(b)(3)(F) of the Act.88
The Proposed Rule Change makes the ambit of the Technology, Security and
Resilience Committee and the Risk Committee clearer. For example, under the proposal,
the Technology, Security and Resilience Committee’s purpose would be changed to
represent the interests of the Board in the sound management of operational resilience to
ensure that technology security, cyber security and operational resilience strategies,
investments and outcomes support the mission, values, and strategic goals of LCH SA.
To reflect this change in scope, LCH SA proposes renaming the Committee the
Operational Resilience Committee. LCH SA also proposes a new Article 3.2 of the Risk
Committee ToR clarifying that the risks within the scope of the LCH SA Risk Committee
are financial and model risks and operational resilience risks.
Further, the Proposed Rule Change would more clearly identify responsibilities
and maintain consistency between those responsibilities and the scope of certain
Committees. For example, LCH SA proposes adding Articles 4.2.13 through 4.2.15 to

15 U.S.C. 78q-1(b)(3)(C).

15 U.S.C. 78q-1(b)(3)(F).

15 U.S.C. 78q-1(b)(3)(F).

the ToR of the Operational Resilience Committee to require the Operational Resilience
Committee to review certain matters and provide advice to the Risk Committee.
Relatedly, proposed changes to Article 11.3 of the ToR of the Risk Committee would
require the Risk Committee to review and approve recommendations of the Operational
Resilience Committee for certain matters. LCH SA’s proposal would also add a new
Article 1.3 to the Operational Resilience Committee ToR requiring that the Operational
Resilience Committee help with the review of a number of different policies. Further,
LCH SA proposes deleting language from certain ToR to ensure its Committees do not
encroach on one another’s responsibilities. To that end, along with other provisions, LCH
SA proposes removing Article 11.2 of the Risk Committee ToR, which requires the Risk
Committee to review and provide advice on any aspects of LCH SA’s operational risk
management framework on request by the Audit Committee or the Board. LCH SA also
proposes adding a new Article 3.3.4(a) to the Audit Committee ToR requiring the Audit
Committee to approve the Compliance policies and be informed of any breaches. To
make sure that the Risk Committee has appropriate oversight of all risks, LCH SA
proposes replacing the Head of Financial Risk of LSEG, or their nominated delegate,
with the Chief Risk Officer of LSEG, or their nominated delegate, in current Article 1.2.6
as an ex officio party to be invited to Risk Committee meetings in a non-voting capacity
from time to time.89
The proposed changes would also help clarify and simplify LCH SA’s ToR by
deleting redundant text. For example, the proposal would remove redundant references to
the Audit Policy from Articles 1.4 and 1.5 of the Audit Committee ToR. Likewise, the
proposed deletion of Article 2.3.2 from the Audit Committee ToR would eliminate a
duplicative provision that indicates that the LCH SA Audit Committee Chair may also be

Notice, 89 FR at 45719.

appointed as the Chair of the LCH Limited Audit Committee. A provision in the ToR of
the Audit Committee for LCH Limited already notes the same person can be Chair of
both committees.
LCH SA also proposes changes making the ToR clearer by improving their
accuracy, renaming items, and identifying where to find information. For example, the
Proposed Rule Change would make a number of changes related to the retirement of the
LCH Group Chief Risk Officer position. Additionally, LCH SA proposes changing the
name of reports identified in Article 1.3.5 of the Audit Committee ToR in line with
additional details contained in the reports. LCH SA also proposes noting that initial
margin policies that the Risk Committee must review are located in the Financial
Resource Adequacy Policy.
By making the ambit of the Committees clearer, more clearly identifying
Committee responsibilities, and maintaining consistency between Committee
responsibilities and Committee scopes, LCH SA reduces the potential for confusion by
Committees or individuals as to whether they have a specific responsibility. By deleting
redundant text, LCH SA lowers the chance that it could have contradictory text within its
rules, which would also create confusion. By correcting inaccurate text, LCH SA makes
it less likely that there is confusion as to what the ToR require. By renaming items to
better match their contents and identifying where to find information LCH SA improves
the chances that individuals can find accurate information when referring to their ToR
and thereby reduces the likelihood there will be confusion. Reducing the potential for
confusion could help ensure that Committees complete their responsibilities in timely
manner. To the extent Committees, such as the Operational Resilience Committee or the
Risk Committee, do not complete their responsibilities, they may fail to identify certain
changes in risk and therefore fail to initiate processes that could minimize those risks.
Ultimately, failure to minimize risks could result in LCH SA not having sufficient funds

in place to recover from a Clearing Member default, which could in turn result in a
disruption of clearing services. Thus, by making the ambit of the Committees and their
responsibilities clearer, maintaining consistency between Committee responsibilities and
Committee scopes, eliminating redundant text, improving the ToR accuracy, renaming
items, and identifying where to find information, LCH SA promotes the prompt and
accurate clearance and settlement of securities transactions and assures the safeguarding
of securities and funds which are in the custody or control of it or for which it is
responsible.
Multiple proposed changes would also ensure that qualified individuals
participate in LCH SA decision making. For example, LCH SA proposes that Article
2.1.2 of the ToR of the Operational Resilience Committee be revised to require that
members of the Operational Resilience Committee have the relevant expertise required
for the Committee to function properly as well as recent and relevant experience of the
operations of LCH Group. LCH SA also proposes changes to its definition of User Risk
Committee members in Article 1.1.3 of the Risk Committee ToR which would add
operational risk management to the list of subject matters in respect of which such
Committee members should have significant expertise and experience. Additionally,
LCH SA’s proposal would allow CEO of LCH SA to approve trade venues which present
no novel risk features and require no amendment of risk controls subject to the Risk
Committee being notified of such approvals. The Proposed Rule Change would also
strengthen or maintain the ability of Committees to carry out their responsibilities by
ensuring that the appropriate Committees and individuals receive notice of certain
reviews. For example, new Article 6.4 to the Risk Committee ToR would require the
Risk Committee to be notified of the outcome of the annual independent validation of the
counterparty credit scoring model in accordance with the Model Governance, Validation
and Review Policy. Likewise, new Article 8.4 of the Risk Committee ToR would specify

that the Risk Committee must be notified of the outcome of the annual independent
validation of all margin models in accordance with the Model Governance, Validation
and Review Policy.
Additionally, the Proposed Rule Change would strengthen the ability of
Committees to carry out their responsibilities because the proposed change would protect
confidential information and thereby would afford the Risk Committee the ability to
obtain information. In proposed Article 1.6 of the Risk Committee ToR, LCH SA would
specify that external Risk Committee members’ consultations with other individuals
within their organization under Article 1.6 are subject to restrictions set out in
confidentiality agreements signed by the external member. By protecting confidential
information in this instance, the proposed rule change would enhance and improve the
information and recommendations provided to the Risk Committee by its external
members.
Ensuring that the individuals making decisions related to the administration of a
clearing agency are qualified to make those decisions, receive relevant information from
important notices, and receive quality information and informed recommendations from
external stakeholders helps decrease the chance of those decisions being misinformed or
wrong, which in turn helps decrease the chance that a misinformed or wrong decision
increases the possibility of a Clearing Member default or interruption to the clearing
agency’s functions. As such, by ensuring that qualified individuals participate in LCH
SA decision making, that notices are received, and that external members are able to
consult with other individuals in their organizations under certain circumstances, LCH
SA promotes the prompt and accurate clearance and settlement of securities transactions
and assures the safeguarding of securities and funds which are in the custody or control
of it or for which it is responsible.

The Proposed Rule Change would also delete text from Article 10 of the ToR of
the Board requiring meeting minutes to be translated to French. This requirement is now
unnecessary due to the Board’s composition. Board members would still approve the
minutes, as required by the Board ToR, which will help ensure that they continue to carry
out their responsibilities to ensure that the minutes accurately reflect meetings of the
Board, which in turn will help LCH SA continue to ensure that LCH SA and its Board
continue to comply with applicable rules and regulations and have accurate information
to address potential defaults, trading disruptions, and other issues that could affect LCH
SA’s ability to support the prompt and accurate clearance and settlement of securities
transactions and the safeguarding of securities and funds which are in the custody or
control of LCH SA or for which it is responsible.
For the foregoing reasons, the Commission finds that the Proposed Rule Change
is consistent with the requirements of Section 17A(b)(3)(F) of the Act.90
C.

Consistency with Rule 17Ad-22(e)(2)(v) under the Act

Rule 17Ad-22(e)(2)(v) requires covered clearing agencies to establish, implement,
maintain, and enforce written policies and procedures reasonably designed to specify
clear and direct lines of responsibility.91 Based on its review of the record, and for the
reasons discussed below, the Commission believes that LCH SA’s changes are consistent
with Section 17Ad-22(e)(2)(v) of the Act.92
Several of LCH SA’s proposed changes specify clear and direct lines of
responsibility. Proposed Article 1.3 of the Operational Resilience Committee ToR would
require that the Operational Resilience Committee contribute to the review of certain
Operational Resilience policies, including the Technology Risk Policy and the

15 U.S.C. 78q-1(b)(3)(F).

17 CFR 240.17Ad-22(e)(2)(v).

17 CFR 240.17Ad-22(e)(2)(v).

Information Security and Cyber Risk Policy. Proposed Article 9.7 of the Risk Committee
ToR would require the Risk Committee to review default management fire drill exercise
reports to assess LCH SA’s default management process. Proposed Article 3.3.4(a) of
the Audit Committee ToR would require the Audit Committee to approve the compliance
policies and be informed of any breaches. Proposed Article 12(e) of the ToR of the
Board would require the Board to approve LCH SA’s Wind Down plans. Numerous
additional examples can be found throughout LCH SA’s proposal.
The Commission finds, therefore, that the Proposed Rule Change is consistent
with the requirements of Rule 17Ad-22(e)(2)(v) under the Act.93
IV.

Conclusion

On the basis of the foregoing, the Commission finds that the Proposed Rule
Change is consistent with the requirements of the Act, and in particular, Sections
17A(b)(3)(C)94 and 17A(b)(3)(F) of the Act95 and Rule 17Ad-22(e)(2)(v).96
IT IS THEREFORE ORDERED pursuant to Section 19(b)(2) of the Act that the
Proposed Rule Change (SR-LCH SA-2024-003) be, and hereby is, approved.97
For the Commission by the Division of Trading and Markets, pursuant to
delegated authority.98
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-15194 Filed: 7/10/2024 8:45 am; Publication Date: 7/11/2024]

17 CFR 240.17Ad-22(e)(2)(v).

15 U.S.C. 78q-1(b)(3)(C).

15 U.S.C. 78q-1(b)(3)(F).

17 CFR 240.17Ad-22(e)(2)(v).

In approving the Proposed Rule Change, the Commission considered the proposal’s impacts on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

17 CFR 200.30-3(a)(12).